Giving transitions: When we give to charity or give gifts to grandchildren.
Clients feel vulnerable during these changes in their lives, and their judgment is likely clouded. That underscores the need for planners to be proactive and pre-emptive in their approach. An important question to ask: “When are your clients most likely to make self-sabotaging moves, to let emotion dictate over logic or to behave in a manner that is counterproductive?” Most likely, it’s during these high-impact life passages.
A major bank conducted a study specifically on the retirement transition and when advisors should begin the conversation about that transition with clients in order to ensure that assets carefully cultivated would stay put and not be squandered. The bank’s conclusion was that planners should start the dialogue four and a half years ahead of the actual transition to secure their own places in client minds as the go-to professionals.
But those familiar with my “Return on Life” concept should know instinctively by now that the life aspect must be fully appreciated before the financial aspect can be addressed. Unfortunately—or fortunately, as your personal understanding may go—most practitioners have their eye on the money in motion (the effect) and not on the life transition (the cause).
A personalized financial plan must address the transitions unique to each client. It is better to prepare than to repair. Much self-sabotaging financial behavior could be avoided by proactively addressing life transitions. There is a strong link between a life in transition and money in motion.
Over the past two decades, my organizations (the Financial Life Planning Institute and ROLAdvisor.com) have been conducting studies on the life transitions affecting clients’ financial well-being. Their research identified more than 60 such transitions and also unearthed the financial implications for each. Some of the research comes directly from financial planners themselves; the Financial Life Planning Institute has aggregated data over the last decade on a life transitions checklist where clients indicated to their planners the specific transitions going on in their lives.
In spite of market meltdowns and turbulent world events, the most frequently indicated transition was one that few planners ever discussed with their clients before using this planning tool: their concern about aging parents. The unintended consequence of the aging revolution is that many boomers are being sandwiched—forced to act as shepherd for both the preceding and following generations.
More To Life
There is much more to life than college, retirement and death—and we have to start practicing in a manner that acknowledges this reality. To that end, I’ve designed a tool to facilitate a dialogue about life transitions called the “$Lifeline.”
This is designed as a collaborative conversation between advisor and client. The advisor helps clients map out the approaching transitions on their personal lifelines and then begins, one by one, to address the financial implications of each, as well as devise a strategy for addressing those implications.